April 14 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson praised Paul Wolfowitz, the World Bank president who is battling to save his job, after the group's board chastised him and staff called for his resignation.

``I have a very high regard for Paul Wolfowitz,'' Paulson told a news conference yesterday after hosting a meeting in Washington of Group of Seven finance officials. He described Wolfowitz as a ``very dedicated public servant.''

Wolfowitz also received expressions of support from the White House, which is crucial to his survival because the U.S. is the biggest shareholder in the World Bank and selects its president. Other finance ministers suggested that Wolfowitz, 63, may have trouble recovering from the controversy.

``We'll have to see if Wolfowitz will be able to retain the moral authority necessary to fulfill his duties,'' Brazilian Finance Minister Guido Mantega told reporters in Washington. His French counterpart, Thierry Breton, declined to back Wolfowitz.

The furor is overshadowing the semiannual gathering of the nations that are stakeholders in the World Bank, which lends $23 billion a year on programs to raise literacy, fight disease and clean up the environment.

World Bank directors, in a statement yesterday, found that Wolfowitz personally dictated the details of a transfer and promotion for a female employee along with an unusually large raise. The directors said they would make a speedy decision on his future.

`Victimized'

The staffer, Shaha Riza, said she has been ``victimized'' for accepting a deal to transfer out of the bank.

``I would like to reiterate that I did not wish to leave the bank and did not, and do not expect any special considerations,'' Riza, 52, wrote in a letter to board members that was among 101 pages of documents released yesterday.

Paulson, 61, said the board's deliberations should be allowed to run their course. ``I think it's an appropriate process,'' he said. ``This shouldn't call into question or be read as any lessening of U.S. support for Paul Wolfowitz.''

Finance ministers from other G-7 nations refrained from offering public support. Asked whether he has confidence in Wolfowitz, France's Breton said: ``I have confidence in the bank.''

Germany's minister in charge of World Bank affairs, Heidemarie Wieczorek-Zeul, said Wolfowitz should make up his own mind about his future.

``Paul Wolfowitz has admitted his mistake and apologized,'' she told reporters in Washington today. ``He has to decide for himself whether he can continue to fulfill his duties credibly under these circumstances.''

Hilary Benn, the U.K. development secretary, told reporters in Washington today that ``the whole business has damaged the bank and should never have happened.''

African Ministers

Finance ministers from Africa, a prime recipient of World Bank aid, were more supportive.

``He certainly championed our cause over the last two years of his leadership and we look forward to it continuing,'' Liberia's Antoinette Sayeh said at a news conference today.

Wolfowitz, the former deputy U.S. defense secretary and an architect of the war in Iraq, was named to the World Bank post by President George W. Bush in 2005. Bush still backs Wolfowitz, White House spokeswoman Dana Perino told reporters.

``We expect him to remain as World Bank president,'' Perino said.

Riza, an eight-year bank veteran who worked as a communications officer, was put on temporary assignment at the State Department to comply with World Bank rules preventing one partner from overseeing another. At the same time, she was given a 36 percent raise that the Staff Association, which represents 13,000 employees, says is twice as large as bank rules allow.

Wolfowitz Memo

Wolfowitz sent a memo to the bank's personnel manager ``directing him to reach an agreement with the staff member and specifying in detail the terms and conditions,'' the directors' statement said.

Wolfowitz told the group's human resources director to lift Riza's salary to $180,000, with further guaranteed increases of about 8 percent a year, according to a memo released by the board. At the end of Wolfowitz's five-year term, she was to be offered a promotion to the level of director, with a further promotion to vice president should Wolfowitz stay longer.

After her first annual raise, Riza earned $193,590 in her State Department job, free of income taxes because she isn't a U.S. citizen. The raises were justified by the disruption to Riza's World Bank career that would be caused by her transfer, according to the memo.

Wolfowitz depicted his decision to promote Riza as a good- faith effort to carry out recommendations of the board's ethics committee. Still, ``I take full responsibility for the details,'' he said this week, and appealed for understanding of a ``painful personal dilemma.''

`Psychological Damage'

Riza, in her memo to the board, said she never wanted to leave the bank. She described the ``professional, physical and psychological damage'' she had suffered and said the people who had leaked details of the arrangement should be held responsible for violating confidentiality rules.

``I have now been victimized for agreeing to an arrangement that I have objected to and that I did not believe from the outset was in my best interests,'' wrote Riza, who is a U.K. citizen.

Wolfowitz avoided reporters yesterday after giving a speech urging developing nations to cut red tape. He presented an award to Georgian Prime Minister Zurab Nogaideli and received a bottle of wine in return.

``One of the reasons I agreed to come here today is they promised me a bottle,'' Wolfowitz said.

Iraq Plans

Wolfowitz's tenure was already marked by discord. He raised hackles among staff members over plans to beef up the bank's presence in Baghdad, and his drive to fight corruption among the bank's borrowers prompted concern that aid intended to help the poor might be halted.

Nancy Birdsall, who runs the Washington-based Center for Global Development and is a former director of policy research at the bank, said on her Web log that Wolfowitz should quit because he ``has become a distraction not a leader at a moment when leadership is sorely needed.''

To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net; Christopher Swann in Washington at cswann1@bloomberg.net

Last Updated: April 14, 2007 16:43 EDT